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The original was posted on /r/newzealand by /u/InnovateOurWayOut on 2024-09-21 21:52:33+00:00.
A few glum posts on here have convinced me to try to inspire a little confidence and maybe motivate one or two others to get involved with helping shape New Zealand's economic future.
New Zealand doesn't need to look for a unique opportunity to save our economic future, we just need to position ourselves well in the global capital investment boom taking place right now, the largest in human history.
What is this opportunity literally staring you in the face? The combination of computing power and energy running the device you're using to read this.
These are the core inputs that will fuel the vast majority of future economic growth around the world. New Zealand should strive to become a magnet for investment into new computing capacity (i.e. data centers), thereby also stimulating huge demand for new renewable electricity generation (i.e. massive offshore wind farms).
We should consider what regulatory changes and/or incentives may be necessary to accelerate this investment.
Computing capacity will be the most important enabler of economic growth for the next 50+ years, just like energy has been the most important enabler of economic growth since the industrial revolution.
The more computing capacity a country has, the more wealth there will be.
Unfortunately for those involved in building the massive new data centers - predominately the big five tech companies throwing hundreds of billions at this - there is a real risk that emissions are going to increase unless they find renewable electricity sources to rely upon. These companies are all signed up to climate targets that will force them into investments that avoid higher emissions wherever possible.
Just yesterday, we saw Microsoft enter an agreement to restart a nuclear reactor at the site of the worst nuclear disaster in US history to support growth for their AI computing capacity. And a week ago there were reports of two proposals to build data centers in the US worth more than $100B USD, each likely to require electricity capacity equivalent to New Zealand's entire existing capacity.
Fortunately for New Zealand, we have an abundance of renewable energy resources that we can tap into. And, even better, politicians from all stripes generally agree that accelerating the build of new renewable electricity generation is a good thing.
Best of all? Stimulating a massive renewable generation construction campaign will drive down electricity prices for everyone...
Oh wait. Here's the catch.
We have an electricity market that is dominated by several players who aren't leaning into the upside of lower energy prices for NZ Inc.
They behave like traditional utilities in a mature market with margins to protect. This shouldn't be surprising given the returns that have been available and ultimately, they believe they're just acting in the best interests of their shareholders.
That's a problem for the rest of us though, and for attracting meaningful investment into new computing capacity.
If the electricity prices were heading in a consistently downward trend, we might generate a bit of interest. But based on what we've seen recently, there's not really any reason to be optimistic that New Zealand will see an influx of investment unless something changes. On top of that, we're facing competition from every other country, and those with existing wealth will be moving to make themselves as attractive as possible for this new investment.
So we should consider what regulatory changes and/or incentives might position us best in this competition and we should start by focusing on the electricity market.
TLDR: There's a giant wave of investment going into data centers, so we should find ways to attract this to New Zealand, particularly through solving the lack of competition in the wholesale electricity market.